Bitter taste to linger for Vietnam beer makers

Several beer makers in Vietnam including giants Sabeco and Habeco posted a sharp year-on-year decrease in revenue and/or profit in Q4/2023 and for the whole year.

The lackluster performance has been attributed to impacts of the government’s Decree 100 that severely punishes driving under the influence; as also the pending imposition of alcohol tax.

Difficult economic conditions and reduced income that prompted consumers to save money and choose cheaper products were also factors.

Sabeco, listed on the Ho Chi Minh Stock Exchange (HoSE) as SAB, reported Q4/2023 net revenues of VND8.52 trillion ($347.2 million), down 9% year-on-year. Its net profit was VND966.5 billion ($39.4 million), down 10.18%, lowest since Q3/2021.

In 2023 as a whole, Sabeco's revenue dropped VND30.7 trillion ($1.25 billion) from VND35.2 trillion in 2022, achieving 76% of the VND40.27 trillion target. The company fulfilled only 74% of its after-tax profit target of VND5.8 trillion.

In a note sent to the State Securities Commission, Sabeco CEO Tan Teck Chuan Lester said net revenue was lower than the previous year due to fierce competition, reduced consumer demand and the impact of Decree 100.

Meanwhile, Habeco (HoSE: BHN) reported Q4/2023 net profits of VND63.9 billion ($2.6 million), up 23.6% over the same period the previous year, thanks to a reduction in corporate income tax.

In 2023 as a whole, Habeco earned net revenues of VND7.76 trillion ($316.25 million) and after-tax profits of VND355 billion ($14.5 million), down 7.7% and 30% year-on-year, respectively. However, the company exceeded its year targets by by 5.3% and nearly 60%, respectively.

Apart from Sabeco and Habeco, small and medium-sized beer producers also faced many difficulties.

Hanoi-Hai Duong Beer JSC (Hanoi Stock Exchange or HNX: HAD), Hanoi Liquor and Beverage JSC (Unlisted Public Companies Market or UPCoM: HNR), Hanoi-Quang Binh Beer JSC (UPCoM: BQB) all reported losses in Q4/2023.

BQB and HNR were the only two companies suffering losses for the whole year.

In contrast, businesses recording higher year-on-year Q4/2023 profits included Saigon Quang Ngai Beer JSC (UPCoM: BSQ) and Saigon Phu Tho Beer JSC (UPCoM: BSP).

BSQ recorded net profits of VND22.4 billion ($913,000) in Q4/2023, significantly better than the loss of VND1.7 billion in the same period a year ago. In 2023 as a whole, the company's net profits fell 41% year-on-year to VND100.7 billion ($4.1 million).

Meanwhile, BSP reported Q4/2023 net profits of VND1.4 billion ($57,000), compared to a loss of VND712 million in the same period the previous year. For the whole year, the figure was VND5 billion($203,770) , seven times higher than 2022.

The enterprise with the strongest increase in Q4/2023 net profits was Saigon Song Lam Beer JSC (UPCoM: BSL) at more than VND7.8 billion ($317,880), up 3,123% year-on-year. However, the figure for the whole year was VND29.6 billion ($1.2 million), down nearly 27%.

Difficulties to linger

The beer market in particular and that of alcoholic beverages in general are forecast to face numerous difficulties in the coming years.

According to the Vietnam Industry Research And Consultancy (VIRAC), Decree 100 will continue to be a major roadblock this year, hindering the recovery of the beer industry. The prices of input materials are forecast to increase sharply, affecting the profits of beer makers.

Sharing the same view, broker Maybank Securities (MSVN) says stricter implementation of Decree 100 and the pending alcohol tax imposition will continue to have a significant impact on beer sales in Vietnam.

Consumers will tend to save money and choose cheaper products due to ongoing economic difficulties, it adds.

However, in the long term, the broker says the trend towards premium products will be maintained in Vietnam, driven by growing incomes and a rising middle class segment.

On the other hand, the beer industry will struggle as the NoLo (No and Low Alcohol) trend among young people is increasing. According to NBC News, current beer and other liquor makers not only face a decline in consumer demand but also competition from new rivals.